By Uwin Lugoda The recent revelation of tax arrears worth billions of rupees, is due to companies, most of which are privately owned, taking advantage of the prolonged judicial process, The Sunday Morning learnt. Speaking to The Sunday Morning, Committee on Public Accounts (COPA) Chairman Prof. Tissa Vitharana said that large corporations owe the Government billions of rupees in unpaid taxes dating as far back as 2016. The issue was recently brought up by IRD Commissioner General H.M.W.C. Bandara, who revealed to COPA that billions of rupees in tax arrears, owed for many years, could not be recovered due to the lengthy judicial process and delays in the courts. When contacted, Ministry of Justice Chief Legal Advisor Udaya Rohan De Silva PC told The Sunday Morning that these tax evaders were taking advantage of delays in the judicial process to delay making their payments. He observed that the Government has allowed appeals to the Tax Appeals Commission (TAC) once tax notifications are received, while these companies can also take the issue to court. Most of the time, these companies appeal to the TAC or the courts over small technicalities, prolonging the payment period, as these cases can take up to 10 years to resolve. By this point, even if the company is required to pay the tax, they will only have to pay the original amount. De Silva PC pointed out that the Government should therefore take action to avoid these delays. “We see this when the TAC rejects an appeal. When they do, they are supposed to send a letter to the company in question as soon as possible, saying that they have to pay the taxes within a certain period of time. But most of the time, the TAC will send the letter towards the end of that period or after that period is over. Companies use this to appeal to the courts and further prolong their payments by another two to three years.” The TAC was not available for immediate comment. De Silva PC further noted the IRD too needs to be more flexible to avoid delayed payments. He explained that most of the time, the TAC gives both the parties an opportunity to settle (i.e. allowing the company to pay Rs. 450,000, instead of the Rs. 500,000 they owe); however, the IRD refuses to accept these settlements, thereby further prolonging payments. “Ultimately, the IRD might end up getting nothing at the end of the case due to small technicalities, and even if they win, they only get that initial amount at a time when the monetary value of the said payment has decreased. Therefore, we need to have a straightforward mechanism, where they only allow these companies to appeal to both the TAC and the courts, under special circumstances.” Prof. Vitharana concurred with De Silva PC that the tax system should be streamlined. He explained that while they are currently reviewing the arrears, they are yet to take any measures in this regard. Meanwhile, COPA also recently revealed that the tax files pertaining to the tax period up to 31 December 2015 were under the control of the legacy computer system and that since 1 January 2016, it has been under the “RAMIS” computer system. The Committee pointed out that according to the relevant report, these systems do not accurately reflect the actual amount of tax that can be recovered. Therefore, the Committee has informed the IRD that this too should be resolved, as there is an issue with the accuracy of the list prepared concerning taxpayers in arrears. They also directed the IRD to expedite the recovery of tax arrears and fines. Commissioner General Bandara, speaking to The Sunday Morning, said that they are in the process of preparing another tax collection report, which they plan to submit to COPA on 23 April at the next meeting to be held in this regard.